When Safety Is the Product

For six months, a shipment of 100,000 sleeping bags to a major US retailing company has been sitting in a US warehouse, held up because the paint on inch-long (25-millimeter) zipper pulls on the bags failed lead testing by 0.1 part per million over the limit. The company is trying to figure out what to do with them.

That is just one bit of the fallout over product safety that has engulfed the thousands of men and women who act as intermediaries between Asian — particularly Chinese — manufacturers and the Western companies buying their products. It also brings a spotlight to the staggering volumes of their shipments. Otto International Asia, for instance, delivers 250,000 individual shipments per year to customers in Europe and the United States. Otto is hardly alone. Wal-Mart last year imported US$27 billion worth of goods from China and was single-handedly responsible for 11 percent of the growth of the US-China trade deficit from 2001 to 2006.

Despite the fact that an overwhelming majority of the products coming out China are defect-free, much of what the sourcing companies ship is now coming under renewed scrutiny because of a highly publicized series of mishaps over the past year. The name that is ringing everybody’s bell is Mattel, one of the biggest toy manufacturers in the United States, which announced in August that it was recalling 967,000 toys destined for Christmas shelves because they were covered with lead paint. Earlier in the year, RC2 Corp, a toy designer and marketer, announced it was recalling 1.5 million Thomas trains because they had been coated in lead paint as well.

But Mattel and RC2 are hardly alone either. The variety of items ordered recalled by the US Consumer Product Safety Commission for lead in paint is staggering, and it extends well beyond toys. Lead seems to be everywhere. In October, the safety commission ordered the recall of 80,000 football bobble-head cake decorations by Minnesota-based DecoPac Inc. The product safety commission list includes 160,000 children’s potty-training seats from RC2, 84,200 children’s pencil pouches from Raymond Geddes & Co, children’s necklace and jewelry items, Halloween “ugly teeth” from Amscan Inc and 350,000 “cool clip” bookmarkers – because of lead paint on what appears to be a paperclip. Sports Authority recalled 11,000 aluminum water bottles used for sports activities.

Every one of those items and scores more contain the words “Made in China.”

According to the US National Safety Council, children under the age of six are particularly vulnerable to exposure to lead, which interferes with the development of the brain and central nervous system and could take as much as 10 points off IQ.

“This is just one of the historical problems that are only coming to the forefront because of increased awareness,” says a 17-year veteran of contract sourcing for the US retailing company. He asks that his name not be used because of the sensitivity of the recall of the sleeping bags. “Because of the Mattel situation, the awareness has come up.”

It isn’t just lead paint. With such a vast amount of material flowing on to main-street merchandisers’ shelves from China, the Asian suppliers are increasingly under the gun for a whole variety of concerns. International labor organizations and other non-governmental organizations for years have gone after Nike and other sports-apparel manufacturers over allegations of sweatshop conditions, or after furniture makers over allegations of environmental pollution.

But the companies really under the gun are only partly Nike or Hasbro. It is the sourcing companies, which have contractual relationships with them to deliver the goods. They have developed voluminous handbooks covering corporate social responsibility, environmental remediation, health and safety. Still, however, it takes constant vigilance to make sure factory owners are delivering what they said they would deliver, and out of adequate factory conditions.

The companies are worried about the drawstrings in children’s hooded sweatshirts, which are not allowed by US product-safety laws to extend more than 5 inches (12.5 centimeters) from the hoods because children might become entangled in them and suffocate. Drawstrings must now be sewn into children’s trunks and pants so that only 2.5 inches (6.35 cm) protrudes on either side because of the danger of entrapment or entanglement.

So-called button batteries – the dime-sized energy sources of calculators and a wide variety of children’s toys – now must have a screw-in cover. Button batteries can leak and if swallowed must be removed surgically because the acid can injure or kill a child. Some 167,000 Starbucks coffee mugs were recalled in December because the plastic handle could detach when the mug was heated. Nike recalled 235,000 football-helmet chin straps in November because of the possibility they could break and injure players.

“The craziness of what we have to do to do is amazing,” the contract manager says. “Pre- production samples have to be tested, as well as two different samples from bulk production. If any of those samples fail for lead or heavy metal, products that are completely packed and sealed for final product production have to be sent out again for testing on a random basis. When anything that has a failure at any stages gets to the US, it goes to the warehouse and the whole shipment is again sent out for testing.”

This has left the sourcing companies in a constant process of testing – not only originally when the product is made, but on shipments as well to make sure standards are being observed. In addition to the attention to product testing, another whole industry has been spawned in Asia – auditing companies that contract with major manufacturers to make sure the factories that provide the goods are observing ethical standards in hiring and firing, working conditions and environmental protection.

As one observer involved in sourcing for one of the United States’ biggest retailers told Asia Sentinel, building long-term relationships with suppliers is most desirable, and the factories know that supplying behemoths like Nike or Wal-Mart or Sears can be a ticket to prosperity. But more often than anybody likes to think about, the factory owner figures he can make a buck by using inferior products, or driving his factory workers well beyond the working hours that the Chinese government specifies, or dumping his waste into the nearest river.

To guard against that, the biggest sourcing companies don’t hire auditing companies. They maintain their own sophisticated auditing units. Tesco International, the world’s third-largest retailer, according to a study of sourcing by accounting and advisory firm KPMG, publishes an 80-page annual review of corporate-responsibility operations dealing with everything from climate change to health, nutrition and well-being of the workers in the factories.

The sourcing companies have become increasingly sophisticated, moving up the value chain. Where once the sourcing agent was the proverbial sweating man in the white linen suit, casing the jungles of Malaya for rubber, today he may be more like Caleb J Hayhoe, the head of RT Sourcing, a US$500 million* company that employs 450 professionals worldwide in merchandising, design, engineering, quality control and assurance, logistics and client services with operations in India, Taiwan, Hong Kong, Thailand and multiple offices throughout China.

*Correction. Originally the figure was given as US$100 million.